City Research Online

Abstract

We analyze the credit supply and real effects of bank bail-ins by exploiting the unexpected failure and subsequent resolution of a major Portuguese bank. Using matched firm-bank data on credit exposures and interest rates, we show that banks more exposed to the bail-in significantly reduced credit supply and tightened credit conditions at the intensive margin. While affected firms were on average able to compensate the reduction in overall credit, SMEs experienced a binding contraction of funds available through credit lines. Those with lower ex-ante internal liquidity responded to this shock by increasing precautionary cash holdings and reducing investment and employment.

Publication Type:	Article
Additional Information:	This is a pre-copyedited, author-produced version of an article published in Review of Financial Studies following peer review. The version of record Beck, T. , Silva, A. and Da-Rocha-Lopes, S. (2020). Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins. The Review of Financial Studies, will be available online at:https://doi.org/10.1093/rfs/hhaa067
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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